Question

The ABC Arena Company wishes to save money to replace the ice making equipment in 12...

The ABC Arena Company wishes to save money to replace the ice making equipment in 12 years. How much should be deposited every 6 months into an account that pays 9% per annum compounded semi-annually in order to have $120,000 for the replacement in 12 years?

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Answer #1

We can use the future value of annuity formula to find the answer:

Where,
FVA = Future Value of Annuity
A = Annuity or payment
i = rate of interest
n = number of years
a = number of payments in a year

Therefore, ABC Arena Company must deposit $2,878.44 every 6 months.

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